SICCI member Don Keli of Jedom Organic Fruits asking a question to CBSI and Ministry reps during a question and answers session.

Small Medium Enterprises (SMEs) who are members of the Solomon Islands Chamber of Commerce and Industry (SICCI) had the opportunity to be informed about the revised SME Credit Guarantee Scheme.

This was during SICCI’s Business After 5 Information Session on Friday 3rd April, 2019. 

Up to forty-four (44) SMEs had the chance to listen to speakers from Government, from the Central Bank as well as BSP, to understand how the Credit Guarantee Scheme works, significant changes to the scheme, eligibility criteria, processes and current uptake of the scheme.

The SME Credit Guarantee scheme is an initiative created by the Solomon Islands Government (SIG). With oversight by the Ministry of Commerce, Industry, Labour and Immigration (MCILI), it is administered by the Central Bank of Solomon Islands (CBSI) through a special fund established to support the Scheme.

The scheme is to encourage locally-owned businesses to participate in the economy by providing collateral guarantee. Providing security where the potential credit-applicant comes short, the scheme assists them to access finance from the five (5) participating Finance and Credit providers under the scheme.

SICCI envisaged that the awareness session will generate interests among SMEs to utilize the range of commercial finance options supported by the collateral guarantee made possible under the scheme, to support growing their businesses.

Presentation were made by the Director, Business and Cooperatives Development within the MCILI, Mr Morris Rapa’ai, CBSI Project Officer: Project Support Unit, Currency and Banking, Ms Rachel Stewart and Bank South Pacific (BSP) SME and Loan Officer, Mr Ernest Tura.

SICCI Chief Executive Officer (CEO), Ms Atenasi Ata highlighted that access to finance and a difficult business environment are holding back SMEs in the country from contributing to the creation of economic wealth for development.

“As a Chamber, we recognize that through this Credit Guarantee Scheme the Government is trying to create more opportunities for SMEs to grow. At the same time, we acknowledge that continued effort is needed in removing systemic barriers to growth across all sized-businesses and a focus on improving business competitiveness generally.

"This would complement this initiative supporting SMEs to secure loans,” Ms Ata said.

Ms Ata notes with appreciation that this revised Credit Guarantee Scheme administered through CBSI will benefit underserved SMEs that struggle to get credit because of collateral requirements and an often-present negative perception of a high risk of failure to repay.

“The Ministry should have a system in place to monitor the developmental impact in this support.”

Previously known as the ‘Micro Small Medium Enterprises Business Loan Guarantee Scheme’, among the significant changes made to the revised Credit Guarantee Scheme is the expansion of guarantee coverage to all types of commercial finance and expansion to include other Finance and Credit Institutions.

The revised scheme also includes now two non-bank financial Institutions. All participating institutions offer a guarantee of 90% for all SME Loans. The scheme will incur for the successful applicant, a fee of 2% of the Guaranteed amount.

It will provide for new finance required for business growth or expansion – not refinancing an existing credit facility. The guarantee can be claimed in the event of borrower’s default meaning that no funds are provided directly to the SME.

For commercial finance, the amount can range from $50,000 - $1 million. The Maximum Credit Guarantee is $300,000.

To be eligible, SMEs must be formally registered and locally owned business entity employing 1 – 50 people. The guarantee is up to 90% for all eligible SMEs. It must also demonstrate that it is 80% owned and controlled by indigenous Solomon Islanders.

To initiate the process, the SME can approach the finance provider of their choice for a loan. The lender or financial institution will have its usual credit and repayment requirements that the borrower SME will have to consider in their loan application. If the lender assesses the loan as eligible, but the SME cannot meet the security requirements, then the lender or financial institution on behalf of the borrower, makes a submission to CBSI for guarantee support.

The role of the scheme is to bridge the gap between what the bank requires as collateral security and the collateral that the borrower can provide.

CBSI will undertake its own assessment of adherence to the eligibility criteria and its due diligence on the involved SME. 

When CBSI is vetting the nomination from the lender, the lender or financial institution and the borrower SME may be requested to supply more information.

Once satisfied with the submission, CBSI will approve the nomination and issue a commitment letter and contract signed by both parties before disbursement of funds to the borrower SME.

About the author

Philip Lilomo is the Chamber's Media & Communications Officer. Philip writes most of the Chamber's media releases. He also manages the website contents, designs the Chamber's monthly newsletter, brochures and maintains the organisation's visual branding. 

Philip can be contacted on email: media@solomonchamber.com.sb 

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